Comment by tptacek

> Induced demand can only function if there's a scarcity to begin with, and it's premised on increased supply increasing affordability (that's the mechanism by which it works)

I don't think that's how the theory is supposed to work. It's more along the lines of, if you build more housing in a place then more people live there and then the higher population density can sustain more shops and jobs, and then people want to live near shops and jobs so the local demand increases.

There are two reasons the theory doesn't actually mean that you can't solve the problem with more housing.

The first is, the effect isn't infinite. As the reductio, if the entire New York Metro area had the population density of Manhattan, it would house 450M people, which is more than the entire US population. So you can build more housing than you have people to move into it even if that would literally cause the entire national population to move to the same place, and of course building that much housing in one place wouldn't cause literally everyone to move there anyway, so the amount you need in practice is far less than that.

And the second is, it's a local effect that comes from net migration. If you build more housing in Denver and that causes people to want to move from Austin to Denver, even if you don't build enough to overcome that in Denver itself, you'd still be lowering housing costs in Austin. And if you're simultaneously building new housing everywhere then there is no net migration and therefore no induced demand anywhere.

This Colorado story includes construction already slowing so why should we be convinced this is the start of a downward trend toward affordability vs a corrective blip after the Covid-era remote work migration trend?

Affordability and desirability are always going to be in constant tension, and any given change - including construction - can tip things more one way than the other. The long-term affordability trends are poor even in states like Texas - is that purely because of construction? No, it also has to do with policies like trying to poach established businesses from other states and importing wealth and high salaried individuals. But it shows that development is no panacea and that even in areas with more open land to build more new construction on there are still powerful trends in the US towards sprawl, low-to-medium density, and rising cost of living. Without explicit intervention like subsidies or direct government construction development will slow - focusing on higher-ROI units for the same spend vs pure unit count - as developers worry more about not being able to command the per-unit price they want if they were to aim for quantity.

> Induced demand can only function if there's a scarcity to begin with

I don't believe this is true, assuming scarcity = shortage. Ad absurdum, if Denver overbuilt such that one could pick up a parcel for a song, you'd see opportunistic demand where there previously was none.